The legislation includes a provision that allows regulators to adjust their salary systems or ban bonuses if they seek a bailout.
"At its meeting today, the Federal Council adopted the dispatch on the legislative proposals for dealing with systemic risks of big banks," the government said in a statement.
"By 2018, systemically important banks should build up more capital, meet more stringent liquidity requirements and improve their risk diversification," it added.
Parliament will consider the new rules in the coming summer and autumn sittings. If approved, the regulations could come into force in early 2012.
In October 2010, a commission of experts advised the Swiss government to take tougher measures than imposed by Basel III international standards, which require banks to raise their high-quality core common equity to 7.0 percent of assets from the current 2.0 percent.
Swiss experts have called for a 10 percent level as well as an additional stock of convertible bonds, which could be turned into capital in case the bank's equity fell below a limit.
On Wednesday, the government suggested that tax incentives be made to promote such convertible bonds.
It also approved a bill that "includes regulation of the remuneration of those systemically important banks that have to be bailed out using federal funds.
"In such cases, the Federal Council will be obliged to order that adjustments be made to the remuneration system of the bank in question," it added.
The adjustments could include a complete ban on bonuses or other forms of variable remuneration.
While the government acknowledged that banks will have to contend with higher costs in the short run in order to meet the new rules, it noted that "investor confidence will increase over the long term, constituting a competitive advantage for Switzerland's financial centre and the institutions affected."
Credit Suisse and UBS are regarded as "too big too fail" because of their size and influence on the Swiss economy.
UBS had to be shored up during the financial crisis by a multi-billion dollar state rescue package.